Warehoused Hepatitis C Patients May Boost Merck, J&J

Fred Poordad, chief of hepatology at the Liver Disease and Transplant Center at Cedars-Sinai Medical Center in Los Angeles, poses in this undated handout image, released to the media on April 19, 2010. Source: Merck & Co. via Bloomberg

April 19 (Bloomberg) -- At Fred Poordad’s bustling
hepatitis C clinic in the heart of Los Angeles, one in every
five patients receives no treatment. They are waiting for a wave
of new drugs, expected in the next 18 months, that may boost
their chance at a cure by as much as 10-fold.

The medicines also may bolster the prospects of Merck &
Co., Vertex Pharmaceuticals Inc. and Johnson & Johnson, the
companies in a race to get the first new treatment to the market
in a decade. About half of patients can’t tolerate the side
effects of existing therapies, which generate $2 billion
annually in sales. The new drugs could expand the market to $10
billion in five years, said Geoff Porges, an analyst for Sanford
C. Bernstein & Co. in New York.

They’re just the first among new therapies anticipated in
the next five years as companies seek a single pill to cure the
infection. Poordad, chief of hepatology at the Liver Disease and
Transplant Center at Cedars-Sinai Medical Center in Los Angeles,
doesn’t object when his patients elect to wait for the new
drugs, a practice known as “warehousing.”

“The warehousing has been going on for the past year or
so,” Poordad said. “I think we’ll see a tremendous increase in
the volume of patients that are treated. That’s the most
exciting thing in the field for a long time.”

The drugs closest to market, Merck’s boceprevir and
telaprevir from Vertex and Johnson & Johnson, are protease
inhibitors crafted from the technologies that led to discoveries
made in the fight against HIV. The new treatments are being
tested as additions to current standard treatments. Both drugs
work by blocking the action of the protease enzyme the hepatitis
virus needs to replicate, directly stopping it from spreading.

Available by 2011

Merck, of Whitehouse Station, New Jersey; Vertex, based in
Cambridge, Massachusetts; and its partner Johnson & Johnson, of
New Brunswick, New Jersey, have said they expect results from
final-stage clinical trials by the second half of 2010, with
submission to U.S. regulators by year-end. Patients can expect
the drugs to be available by 2011, executives said on April 16
at the annual meeting of the European Society for the Study of
the Liver in Vienna.

“We’re on the brink of a revolution,” Porges said in an
interview at the conference. “Investors have been waiting for
this for six to seven years, and investigators and physicians
have been waiting for almost 10 years.” He has an
“outperform” recommendation on Vertex and sees the stock
gaining 23 percent in the next year.

Vertex shares rose 21 cents, or 0.5 percent, to $40.20 at
9:55 a.m. New York time in Nasdaq Stock Market trading. Before
today, the stock had gained 43 percent in the last year.

Scarring Livers

Most of the 170 million people infected worldwide with
hepatitis C don’t know they’re sick, while others fail to
respond to existing drugs or can’t tolerate their side effects.
The virus is spread by contact with infected blood. About 4
million Europeans and 3.6 million Americans have the disease,
and only about 2 percent get treatment, according to Merck.

The illness moves slowly, scarring livers over years or
decades, giving doctors and patients a window of time. Once the
liver is destroyed, however, patients face cancer or organ
failure, with few effective treatments other than a transplant.

The current standard of care is a combination of the
generic antiviral pill ribavirin and interferon, an injection
sold by Merck as Pegintron and Swiss drugmaker Roche Holding AG
as Pegasys. The medications beef up the immune system, helping
it clear the virus from the patient’s blood. They can also
trigger anemia or make patients feel like they have a never-ending flu. The new drugs don’t erase those side effects but can
cut treatment time in half, from a year to about six months.

Rush for Treatment

The protease inhibitors may have the biggest impact in
those who have failed prior therapy. Five to 9 percent of them
are cured by a second course of treatment with existing drugs.
Adding a protease inhibitor appears to boost that number 10-fold, said Poordad, who has participated in studies funded by
Merck, Vertex and Johnson & Johnson.

The first two or three new drugs will take the lion’s share
of the growing market, Porges said, as warehoused patients rush
to get treatment and doctors establish a new standard of care.

Vertex and Johnson & Johnson hold an advantage right now,
Porges said, because their drug telaprevir doesn’t cause the
same levels of anemia seen as a side effect of its competitor
from Merck. Vertex also allowed patients who didn’t respond at
all to other therapies into its clinical trials, possibly
positioning its drug, which has been in development for at least
12 years, for broader use.

“We think that’s going to be an advantage,” said Bob
Kauffman, chief medical officer at Vertex.

Billion-Dollar Business

Hepatitis C is already a billion-dollar annual business for
Merck and will drive growth, said Patrick Bergstedt, the
company’s senior vice president for vaccines and infectious
diseases. The drugmaker acquired most of its treatment franchise
in the $41 billion purchase last year of Schering-Plough Corp.

The three drugmakers lead a packed field of competitors. A
half-dozen other approaches to curing the disease are in
development, with about 30 compounds being studied.

At the liver conference in Vienna, the 1,000-seat
conference room devoted to new drug development was overflowing.
Doctors, researchers and investors lined the walls and sat in
aisles as eight investigators presented data about the second
wave of therapies following on the new drugs’ heels.

Among the most exciting are polymerase and NS5A inhibitors,
compounds that also block viruses from replicating, said Heiner
Wedemeyer, leader of the gastroenterology, hepatology and
endocrinology department at Hannover Medical School in Germany.

‘Major Breakthrough’

Though the three categories of compounds all prevent
viruses from copying themselves, they work in slightly different
ways. Doctors hope that using them together could prevent
patients from becoming resistant, a common problem with viral
treatments, Kauffman said.

“Now there is light on the horizon,” Wedemeyer said,
adding that the first studies to combine only pills, without the
side-effect-laden injections, are under way. “If this treatment
really works, with no resistance emerging, it could be a major
breakthrough.”

Investigators aim in five or 10 years to be able to treat
hepatitis C with just one or two pills, Bergstedt said. No one
company has all the pieces of the puzzle in development yet, he
said. They’re looking aggressively for partnerships on
experimental compounds.

“We’d be stupid not to,” the Merck executive said.
“Everybody’s talking to each other. Nobody really has all the
assets at this stage, and everybody’s starting to position and
starting to accumulate.”

At the Vanguard

Bristol-Myers Squibb Co. is at the vanguard of the next
transformation, said Howard Liang, a Boston-based analyst for
Leerink Swan & Co. While the New York-based company’s drugs are
still in the early stage of development, it’s taking a daring
approach by combining two of its oral medicines in a cocktail
without interferon -- potentially leapfrogging competitors whose
individual therapies are further along.

Bristol’s lead treatment is one of the first NS5A
inhibitors. Roche and Gilead Sciences Inc. are also aiming for
oral combination drugs, and it’s essential to be one of the
first, he said.

The goal may be to get good enough results by the time the
Merck and Vertex drugs are introduced next year to prompt a
second wave of patient warehousing, Liang said.

“If you are Bristol or Roche, and you know you are behind,
you aren’t going to catch the initial bolus,” he said. “What
you try to do is get some data and say, ‘Look, we have something
better on the horizon. Don’t treat everybody. If you can wait,
wait.’”